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Reform Readjustment
Economic development remains China's top priority
By Mei Xinyu | NO. 47 NOVEMBER 23, 2017
 A subway carriage for Boston's orange line at an assembly factory of CRRC Changchun Railway Vehicles Co. Ltd. in Changchun, capital of northeast China's Jilin Province on October 31 (ZHANG NAN/XINHUA)

The economy-related content of the report delivered by Xi Jinping, General Secretary of the Communist Party of China (CPC) Central Committee, to the 19th CPC National Congress shows that development is still the top priority, while measures and the work focus will be readjusted to keep up with the times.

The report indicates that within a certain period in the future, China will maintain the work focus of economic development. We should "adopt a new vision for development." "Development is the underpinning and the key for solving all our country's problems." "We must actively participate in and promote economic globalization, develop an open economy of higher standards, and continue to increase China's economic power and composite strength." "We must continue to pursue development as the Party's top priority in governance."

The fundamental task

We should recognize that the CPC is a party with a strong sense of mission and a political force that had theories first, then established armed forces and finally gained state power. Any major readjustment to the Party's goals and policies must be decided by its national congress. Anyone, at home and abroad, who understands China's conditions, will well understand how important one particular conclusion reiterated by the report is: "Unlocking and developing the productive forces is a fundamental task of socialism."

Throughout the history of the CPC, from starting a revolution to governing the country, unlocking and developing the productive forces has always been an essential theme of the Party's work. Take the land reform as an example. The Law of Land Reform promulgated in June 1950 announced that the primary goal of the land reform was to release rural productive forces in rural areas and develop agriculture in order to blaze a trail for industrialization of the newly established country.

Why did China's land reform open up a new path to industrialization, but land reforms in some African countries caused serious recession in agriculture and even the whole national economy? The root cause is that China's land reform aimed at unlocking and developing productive forces, but the countries that experienced failure regarded land reform as merely a tool for gaining state power and ignored the influence of land reform on productive forces.

In the meantime, the new era that China's socialism is entering is still part of the primary stage of socialism. There are potential risks that conflicts may break out among major countries, and some forces hope to see such conflicts and benefit from them. And in history, there were similar lessons of emerging economies failing to rise. All of this has made it increasingly necessary for the CPC to continue to pursue development as the top priority in governance.

The goal of pursuing development remains unchanged, but the detailed measures and work focus must be readjusted to keep up with the times; the adjustments should both be based on the achievements in the past and consider the changes in reality. Hence the report emphasizes such an idea: "Our development must be sound development. We must pursue with firmness of purpose the vision of innovative, coordinated, green, and open development that is for everyone." In the detailed targets and measures, the report also includes both active and steady plans that take into account economic and social development trends at home and abroad, both at present and in the future.

Farmers drive farm machines on a grain field in Linyi County of Dezhou, east China's Shandong Province on March 26 (ZHU ZHENG/XINHUA)

Financial supervision

Another example is finance, as mentioned in the report: "We will deepen institutional reform in the financial sector, make it better serve the real economy, increase the proportion of direct financing, and promote the healthy development of a multilevel capital market. We will improve the framework of regulation, underpinned by monetary policy and macro-prudential policy, and see that interest rates and exchange rates become more market-based. We will improve the financial regulatory system to forestall systemic financial risks."

Deepening financial reform is an outstanding character of China's economic development since its reform and opening up began in late 1970s: The scales of financial assets have multiplied, the variety of financial services has diversified, and the position of China's financial sector in global markets has also changed, with Chinese banks often topping the global list. The financial sector has played an irreplaceable role in supporting economic growth, especially the stable growth since the U.S. sub-prime mortgage crisis broke out in 2008. However, the rapid growth of the financial sector has also brought some potential risks: Financial resources are moving from the real economy to the virtual economy and debt ratios have risen rapidly. As a result, China's decision-makers have placed great stress on managing financial risks this year.

Against such a background, the report is prudent in its statement on finance. It no longer mentions terms such as modernization of the financial system, financial innovation and inclusive finance, but emphasizes serving the real economy, macro-prudential policy and forestalling systemic financial risks. This is because there are some factors inside China's financial sector that may cause risks. Moreover, central banks of major countries are tightening their monetary policies, which is likely to reduce global liquidity and thereby reverse international capital flows, finally increasing the possibility of financial risks. While global liquidity expands, financial innovation may help increase market shares. When global liquidity becomes tight, financial innovation is very likely to intensify systemic financial risks. Therefore it is reasonable and safe for China to be prudent in financial policies.

Agricultural policies

In the report, policies concerning agriculture, rural areas and farmers include prioritizing the development of agriculture and rural areas; establishing sound systems, mechanisms, and policies for promoting integrated urban-rural development, and speeding up the modernization of agriculture and rural areas; consolidating and improving the basic rural operation system, advancing reform of the rural land system, and improving the system for separating the ownership rights, contract rights, and management rights for contracted rural land; developing appropriately scaled agricultural operations of various forms, cultivating new types of agribusiness, improving specialized agricultural services, and encouraging small household farmers to become involved in modern agriculture; as well as supporting and encouraging employment and business startups in rural areas, and opening up more channels to increase rural incomes.

Keeping up with the times can be seen in sentences such as "developing appropriately scaled agricultural operations of various forms." This was not easy to promote in the past because of concerns that unemployed migrant workers might lose their livelihoods after transferring the management rights of their land. Now China has become the world's largest industrial country, with urbanization and employment in non-agricultural sectors maintaining progress for many years. There are new solutions to issues concerning agriculture, rural areas and farmers, as well as grain security, so relevant policies should be readjusted. With regard to farm produce and other primary products, China's trade policies should be conducive to improving the efficiency and competitiveness of the whole national economy.

The author is an op-ed contributor to Beijing Review and a researcher with the Chinese Academy of International Trade and Economic Cooperation

Copyedited by Chris Surtees

Comments to yushujun@bjreview.com

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